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HMRC internal manual

International Manual

HM Revenue & Customs
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Transfer prcing operational guidance: Accurate delineation of the actual transaction: Economically relevant characteristics

Accurate delineation of the actual controlled transaction requires determination of the economically relevant characteristics of that transaction. “Economically relevant characteristics” refers to both

  1. the conditions of the transaction, and
  2. the economically relevant circumstances in which the transaction took place


Paragraph 1.36 of the OECD Guidelines states that economically relevant characteristics broadly consist of:


  • the contractual terms of the transaction
  • the functions performed by each of the parties to the transaction, taking into account assets used and risks assumed, including how those functions relate to the wider generation of value by the MNE group to which the parties belong, the circumstances surrounding the transaction, and industry practices
  • the characteristics of property transferred or services provided
  • the economic circumstances of the parties and of the market in which the parties operate
  • the business strategies pursued by the parties